Reformation Q3 Fiscal 2026 Earnings: Revenue Rises 19% as Gross Margin Expands

Reformation (NYSE: REF) reported Q3 fiscal 2026 net revenue of $173.6 million, up 19.1% year over year, while diluted EPS fell to a loss of $0.02 from earnings of $0.10. Gross margin expanded to 60.4% and adjusted EBITDA rose 64.2%, but higher operating expenses and IPO-related tax effects pushed the GAAP bottom line into a loss. The company also raised its full-year revenue outlook to $610 million-$612 million.

Core Financial Results

For the 13 weeks ended September 26, 2026, revenue growth was broad-based across channels, product categories, and geographies. Lower average tariff rates and higher average unit retail helped gross margin expand by 252 basis points, including about 50 basis points from IEEPA tariff-related vendor refunds.

The improvement in gross profit did not carry through to GAAP earnings because total operating expenses increased 31.3%, faster than revenue. Adjusted EBITDA nevertheless increased to $23.1 million after excluding items including stock-based compensation.

Business and Channel Performance

DTC remained Reformation’s largest channel, while Wholesale and Other recorded the fastest growth. International revenue also expanded faster than U.S. revenue, indicating that growth was not concentrated in the domestic market.

Active customer growth reflected both new customer acquisition and retention. DTC revenue per customer declined slightly because newly acquired customers typically begin with lower spending levels than existing customers.

Reformation opened seven stores during the quarter, including the reopening of its Palisades location, and ended the period with 77 stores globally. The faster growth of Wholesale and Other revenue supported the top line but partially offset gross margin expansion because of channel mix.

Gross Margin Gains Were Outweighed by IPO-Related Expenses and Taxes

Gross profit increased by about $20.5 million, but total operating expenses rose by approximately $23.2 million. As a result, operating income declined by about $2.7 million despite the double-digit revenue increase.

SG&A expense increased 33.5% to $82.8 million. The increase included $10.5 million of IPO-related stock-based compensation, along with higher shipping and other variable costs, new-store expenses, and public-company costs. Marketing expense rose 20.0% to $14.6 million but remained unchanged at 8.4% of revenue.

Below operating income, Reformation recorded $5.7 million of net other expense, including a $2.2 million loss on debt extinguishment. The company then recognized a $2.9 million income tax provision on $1.7 million of pretax income, producing a 165.9% effective tax rate. Management attributed the elevated rate mainly to limitations on the deductibility of executive compensation following the IPO.

These factors explain the gap between adjusted EBITDA growth and the GAAP net loss. The adjusted EBITDA reconciliation added back $11.0 million of stock-based compensation, as well as interest and other expense, taxes, depreciation, and amortization.

Cash Flow and Balance Sheet

Cash and cash equivalents totaled $97.7 million at quarter-end, compared with $65.5 million at December 27, 2025. Reformation reported total net debt of $36.2 million.

Cash flow information was provided for the first 39 weeks rather than the third quarter alone. Net cash from operating activities increased to $44.7 million from $10.4 million in the comparable prior-year period, while capital expenditures declined to $19.9 million from $35.1 million. The operating cash flow result included $35.4 million of noncash stock-based compensation, while inventory used $23.3 million of cash.

Inventory reached $83.8 million, up approximately 36.1% from $61.6 million a year earlier. The comparison was affected by unusually low prior-year inventory following tariff-related supply-chain disruption. About one-third of the increase reflected a strategic decision to hold more raw materials to improve speed to market, with the remainder tied to seasonal inventory and 17 store openings over the preceding 12 months.

Fiscal 2026 Guidance

Based on the third-quarter results and momentum during the fourth quarter to date, Reformation raised its full-year revenue outlook. It also set its adjusted EBITDA margin forecast at approximately 14.2%, the high end of its previous guidance.

Capital spending is primarily associated with 16 planned new-store openings during fiscal 2026. Because adjusted EBITDA margin is a non-GAAP measure, the company did not provide a reconciliation of the outlook to GAAP net income margin, citing uncertainty around items including taxes, tariffs, foreign currency movements, and potential future charges.

Recent Insider Transactions

The supplied insider data shows 1,603,662 shares purchased across eight transactions and 4,401,122 shares sold across four transactions during the latest six-month period. That produced net insider sales of 2,797,460 shares. The following four recent records contained a clear transaction direction and reported value; other listed filings without those fields are excluded.

These disclosures establish the timing and terms of the transactions but do not, on their own, indicate the insiders’ views of Reformation’s future performance.

Risks Investors Need to Watch

• Operating costs are growing faster than revenue. Total operating expenses increased 31.3% against revenue growth of 19.1%, reducing operating income and margin despite higher gross profit.
• Adjusted and GAAP profitability remain far apart. IPO-related stock compensation and tax effects contributed to a GAAP loss even as adjusted EBITDA increased, making both measures important for evaluating profitability.
• Inventory requires careful execution. Inventory rose about 36.1%, partly to support faster product availability and new stores. Demand forecasting and inventory conversion will affect future working capital and markdown exposure.
• Channel mix could limit gross margin expansion. Wholesale and Other grew faster than DTC and was identified as a partial offset to the quarter’s gross margin improvement.
• Some tariff benefits may not recur at the same level. Gross margin included approximately 50 basis points of tariff-related vendor refunds, while future tariff rates remain a source of uncertainty.

Conclusion

Reformation’s Q3 fiscal 2026 results showed broad-based revenue growth, a larger active customer base, and meaningful improvement in gross margin and adjusted EBITDA. However, higher SG&A, IPO-related stock compensation, other expenses, and tax effects prevented those gains from reaching the GAAP bottom line. The main follow-up items are execution against the raised full-year outlook, operating-cost control, inventory conversion, and whether channel mix and tariff effects allow the gross margin improvement to continue.